Field of the Invention
The present invention relates generally to credit systems and consumer, merchant and credit issuer relationships, and in particular, to a distributed system for commerce for interactions between consumers, merchants and credit issuers, where content is communicated between the parties in an intermediary and distributed form.
Description of the Related Art
In order to enable convenient purchases of goods and services by consumers, the financial service industry has developed many alternative payment methods that allow a consumer to engage in a transaction and receive goods and services on credit. For example, such alternative payment methods may include checks, ATM or debit cards, credit cards, charge cards, etc. Prior to the birth of virtual commerce, as discussed below, such payment options provided adequate convenience and transactional security to consumers and merchants in the marketplace. Virtual commerce and the growth of the Internet as a medium for commerce have placed pressure on the payment options discussed above on the convenience, transactional security and profitability by the credit issuer. Currently, available payment options include significant shortcomings when applied to remote purchasers, such as purchases where the buyer and the seller (that is, the merchant) are not physically proximate during the transaction. Specific examples of remote purchases are mail order, telephone order, the Internet and wireless purchases.
In a typical credit transaction and process, a consumer engages with a merchant at the point-of-sale, such as online at the merchant's website, at the merchant's business or store, over the telephone with the merchant's call/sales center, etc. The merchant sends a request to the credit issuer to obtain authorization or verification data allowing the consumer to consummate the sale. For example, the credit issuer may indicate to the merchant whether the consumer is creditworthy, is over his or her limit, is verified, has the available funds/balance to make the purchase, etc.
According to the prior art, and in the first instance, when a consumer wishes to obtain a credit product, such as a credit card or credit account, from a credit issuer, such as a bank, the consumer fills out an application, whether in hard copy of electronic form, and submits this application to the credit issuer. Once the appropriate information is received from the consumer, the credit issuer will make a decision regarding whether the applicant is eligible for credit product. If the person is, indeed, eligible, and meets the necessary requirements, the credit issuer establishes an account and provides the consumer with either the appropriate account information, or in most cases, a physical credit card for use in engaging in transactions. In addition, in order to successfully consummate the transaction, the consumer must have some preexisting relationship with some credit provider in order to facilitate any non-cash transaction, e.g., an online transaction, a telephone transaction, etc. Therefore, in order to engage in some non-cash purchases, the consumer must obtain credit, initiate the transaction with the merchant, and utilize the obtained credit product to consummate the transaction and receive the goods and/or services.
Once the credit product has been obtained by the consumer, and this credit product is used in connection with satisfying a transaction, the credit request is sent by a merchant to the payment processor. However, the payment processing industry is subject to the programming specifications and hierarchy of the payment processors. Therefore, the merchant communications, credit requests, authorization requests, etc. all “choke” at the payment processor system, which dictates the message format, required data and processing requirements. Accordingly, presently-existing payment processors impart severe limitations on new payment products and methods. In addition, small businesses and merchants do not have enough of a stake in the present process to convince payment processors to change process or the current systems.
These and other deficiencies in the presently-existing processes in the electronic payment industry may be further illustrated as follows. According to the prior art, electronic payment companies (credit issuers) mediate payment between a customer or buyer and a merchant or seller. The seller offers the electronic payment through their point-of-sale channels, e.g., call center, web-store, physical store, etc., and customers selecting the payment option need to be successfully authorized and settled by the merchant. This electronic authorization and settlement event may be done directly with the payment company, or done via an existing payment processor relationship that the merchant has in place for other payment options. The direct method is, by far, the less attractive of these options, because it forces the payment company to physically connect, their payment systems to each merchant. This, in turn, increases the cost of implementation and maintenance for the payment company. The cost is also higher from the merchant's point of view, since the merchant must add a new physical connection to their network and develop custom software to interface to the transaction application provider interface (API) for the new payment option.
Therefore the preferred option for payment companies and merchants is to access new payment services through the merchants preexisting payment processing partners. Since the merchant already maintains a physical connection to the payment processor, and since the merchant has already developed the appropriate programs to interface with the API of the processor, the level of effort to add an additional payment option is much lower. However, from the payment company's standpoint, there are still material shortcomings to this approach. For example, the payment processor's APIs are normally very large and complex software applications that are difficult and expensive for the payment processor to modify. Therefore, while this approach works well for the merchant, it is not preferable for the payment company, since they now have to pay the cost of the API modification to the payment processor, and wait for a lengthy period of time for the changes to be implemented.
Further, payment processors are independent companies in a highly concentrated industry. Presently, the top three payment processors control the majority of payment processing in the United States. Further, these payment processors have formed strategic alliances with specific payment service providers, who may seek to influence and/or restrict the addition of new and valuable payment alternatives to the processor's API. This further raises the cost and slows the implementation cycle for new payment options.
Yet another drawback to online commerce arises from the distributed nature of these electronic transactions, with the merchants likened to spokes around a hub, which is the network credit system. Such a distributed checkout service creates many unmanageable security risks. If all sales occur at the payment process or banking system, certain confidential information is collected at the spokes (merchants) to complete the transaction. This information distribution creates unnecessary risk to the hub. If the information is collected directly at the hub (credit issuer) location, the customer is redirected to the hub from the spoke, which may be undesirable to the merchant. For example, if the hub is the data repository, the merchant often does not trust that the hub will not use consumer to their own ends. In addition, the hub-centric approach often leads to access problems, processing capacity issues, possible offers of other competing goods, etc., which makes this approach undesirable.